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What's Tor?

According to the wikipedia Tor (short for The Onion Router) is a system intended to enable online anonymity.
Tor client software directs internet traffic through a worldwide volunteer network of servers to conceal a user's location or usage from anyone conducting network surveillance or traffic analysis.
Using Tor makes it more difficult to trace Internet activity, including "visits to Web sites, online posts, instant messages and other communication forms", back to the user[6] and is intended to protect users' personal freedom, privacy, and ability to conduct confidential business by keeping their internet activities from being monitored.

According to people behind the Tor Project those are the most common uses of Tor:

Individuals use Tor to keep websites from tracking them and their family members, or to connect to news sites, instant messaging services, or the like when these are blocked by their local Internet providers. Tor's hidden services let users publish web sites and other services without needing to reveal the location of the site. Individuals also use Tor for socially sensitive communication: chat rooms and web forums for rape and abuse survivors, or people with illnesses.

Journalists use Tor to communicate more safely with whistleblowers and dissidents. Non-governmental organizations (NGOs) use Tor to allow their workers to connect to their home website while they're in a foreign country, without notifying everybody nearby that they're working with that organization.

Groups such as Indymedia recommend Tor for safeguarding their members' online privacy and security. Activist groups like the Electronic Frontier Foundation (EFF) recommend Tor as a mechanism for maintaining civil liberties online. Corporations use Tor as a safe way to conduct competitive analysis, and to protect sensitive procurement patterns from eavesdroppers. They also use it to replace traditional VPNs, which reveal the exact amount and timing of communication. Which locations have employees working late? Which locations have employees consulting job-hunting websites? Which research divisions are communicating with the company's patent lawyers?

A branch of the U.S. Navy uses Tor for open source intelligence gathering, and one of its teams used Tor while deployed in the Middle East recently. Law enforcement uses Tor for visiting or surveilling web sites without leaving government IP addresses in their web logs, and for security during sting operations.